What is a 1099-K?
Jan 11, 2023If you accept credit cards in your business, you'll likely be receiving a 1099-K. These are 1099s from your payment processors like Stripe, PayPal, Venmo, etc.
There are some nuances to pay attention to here. The number on the 1099 they send will likely be the gross amount you sold through their service. But you get charged a processing fee right? What you need to do is report the full amount on the 1099-K and then deduct the processing fee as an expense.
Note: This episode was recorded prior to an announcement by the IRS that they would not be making this change to lower the 1099-K reporting threshold to $600 from $20,000. For 2022 reporting, the threshold remains at $20,000.
"Remember, you're just going to have to report all of your income that you make through your business and you'll be fine - so don't get freaked out, let Keep What You Earn be the calm voice!"
What you'll hear in this episode:
- What are credit card and payment processing fees?
- PayPal, Venmo, Stripe, Square, Quickbooks, and other payment processors hold your money.
- How do you know if you’re getting the net amount or the gross amount?
- What’s going on with the 1099 tax credit?
- Why you need to understand how the 10K works.
- Personal Paypal and Personal Venmo are supposedly excluded from these headlines, that does not give you permission to use the personal paypal in the business
- How to file a 1099K.
Here are some brief snippets from this episode:
[00:00:49]
The last company to touch the money before you get it is the one responsible for sending you the 1099. If you collect money through payment processors, you accept credit cards. The 1099K will likely have the gross amount, but you will report in your income the net amount if you don't account for the payment fees.
[00:05:53]
For 2021 and back, the threshold to send that was $20,000. Now they're talking about anyone who made over $600. As of right now, the expectation is that $600 will be the threshold. Do not get scared. Please do not give in to the fear mongering.
[00:11:12]
Tomorrow we'll dive into how to actually file a 1099. That's what you'll be receiving if you receive money through a payment processor. How the hell do I do that? We're going to answer that tomorrow.
[00:11:44]
You could be missing out on massive tax savings that you get from making the ESCORP tax election. I put together a completely free calculator and a questionnaire to see if this tax election may be a good fit for your business. If you enjoyed this episode, please leave a rating and review on your podcast platform.
Related episodes:
160. How to Manage a Business with Multiple Owners with Jeremy Wells, CPA, EA
183. Is it Too Late to Elect the S Corp?
190. Live Q&A: Deducting Startup Costs in a New Business
Resources:
Find everything you need at www.keepwhatyouearn.com! https://www.keepwhatyouearn.com/
Questions about this episode? Text me!: https://my.community.com/shannonweinsteincpa
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The information contained in this podcast is intended for educational purposes only and is not individual tax advice. Please consult a qualified professional before implementing anything you learn.
